PSX Hits Peak with 80% Growth
Overview of PSX’s Performance
The Pakistan Stock Exchange (PSX) has continued its impressive performance for the second consecutive year, boasting an astounding growth of around 80%. By the end of 2024, the benchmark KSE-100 index surged to 111,351 points, a significant leap from the previous year’s close at 62,052 points. This growth trend is a testament to the resilience and potential of the Pakistani market.
Historical Context
In 2022, the KSE-100 index was at 40,420 points. By the end of 2023, it had climbed to 62,052 points, marking a 46% increase. This momentum carried into 2024, with the index closing at 111,351 points on December 28, representing an 80% rise.
Waqas Ghani Kukaswadia, Deputy Research Head at JS Global, noted that the KSE-100 index reached an all-time high of 117,000 points during intra-day trading in CY24, despite significant foreign portfolio investors’ selling due to rebalancing activities.
Fiscal Year Performance
For the fiscal year 2023-24, the KSE-100 surged by 89.24%, closing at 78,445 points on June 30, 2024, compared to 41,453 points the previous year. The market capitalization restored to Rs10.37 trillion, a level last seen in 2017, according to the PSX’s annual report titled “Ode to Service.”
Impressive Gains and Forecasts
The KSE-100 posted a remarkable 70% gain in CY24, the highest return since 2002, making it the second-best performing global market after Argentina. The Pakistan Strategy 2025 report by AKD forecasts the index to reach 165,215 points by December 2025, reflecting a potential upside of 55.5%.
Increased Activity in PSX
Momentum and Trading Volumes
The KSE-100 index started 2024 at lower levels but experienced steady growth, especially from April onwards. By the second half of the year, a sharp rally saw the index reaching a high of 117,039.18 before slightly stabilizing. On December 27, 2024, the KSE-100 closed at 111,351.17, near its peak levels.
The trading volume in 2024 was unprecedented, with 151.4 billion shares traded, almost double the volume from 2023. The daily traded value averaged Rs22.1 billion, indicating heightened investor participation and confidence.
Macroeconomic Reforms
Macroeconomic reforms significantly supported the market’s performance. Interest rates are projected to decline to single digits in CY25, driven by structural adjustments under the IMF’s Extended Fund Facility. Inflation, which peaked at 38% in May 2023, has since been anchored to single digits, boosting investor confidence.
New Listings and Market Innovations
Equity Listings
The year saw the listing of 11 new companies, including prominent entities like the Symmetry Group and TPL REIT Fund-I, raising Rs103.3 billion collectively. This reflects growing corporate interest in the PSX.
Government Instruments and ETFs
PSX facilitated the issuance of 22 government of Pakistan’s Ijarah Sukuk instruments, raising Rs687.81 billion. Additionally, a one-year Discounted Ijarah Sukuk provided innovative opportunities for Shariah-compliant investments. Two new exchange-traded funds (ETFs), including the Mahaana Islamic Index ETF, were launched, focusing on Shariah-compliant and sector-specific investments.
Sector-Specific Performance
Top Performing Sectors
Several sectors emerged as top performers in 2024, including banks, fertilizer, energy, and technology. These sectors benefited from a stable currency, monetary easing, and reform-driven growth. In the medium term, textile exports are expected to lead the market, while technology remains poised for long-term double-digit expansion.
Foreign Investor Interest
Foreign investors have shown increased interest in Pakistani equities, spurred by the country’s improved weight in the MSCI Frontier Markets Index (6.4%). The anticipated reclassification of Pakistani equities into the MSCI Emerging Markets Index has created additional momentum, with seven stocks meeting the reclassification criteria.
Technological and Regulatory Advancements
Market Innovations
PSX introduced a sophisticated primary market auction system for government debt securities and implemented the One-Share Lot System, enhancing liquidity and aligning with international standards. The exchange also prioritized digital expansion, launching tools like the My Portfolio web app and the PSX WhatsApp Service, providing real-time market updates and investor education.
Economic Outlook
Modest Economic Growth
Pakistan’s economic growth remained modest in FY24, with GDP expanding by 2.5%. Projections indicate an uptick to 2.7-3.2% in FY25 and 4.3% in FY26, driven by industrial and services sector recovery. The current account is expected to maintain a surplus for the next two years, supported by strong remittance inflows and moderate import growth.
Monetary Policy
Waqas Ghani Kukaswadia of JS Global noted that the State Bank continues monetary easing, reducing the policy rate by 200 basis points to 13% earlier this month, driven by a faster-than-expected decline in inflation. The Consumer Price Index for November 2024 stood at 4.9%. The State Bank has cut the interest rate by 900 bps since the easing cycle began in July 2024, with real interest rates now standing at 9%.
Inflation and Fiscal Reforms
Kukaswadia forecasts FY25 inflation at 6.5%, with a potential sixth interest rate cut. He emphasized the importance of foreign capital, political stability, and IMF alignment for Pakistan’s macroeconomic stability and investment prospects. Fiscal reforms have resulted in a reduction in the fiscal deficit to 5% of GDP in FY24, with further improvements anticipated.
Expert Insights
Market Stability and Future Prospects
Ahsan Mehanti, MD of Arif Habib Commodities, highlighted the PSX’s strong performance despite low foreign direct investment and foreign outflows, driven by low inflation and SBP policy easing. He noted the IMF disbursements and SBP oversight in stabilizing the rupee. Looking ahead, falling lending rates, positive earnings forecasts, and regulatory changes in sectors like banking, pharma, and auto lending are expected to push the PSX to new records in 2025.
Investment Facilitation
The Special Investment Facilitation Council (SIFC) has emerged as a key driver of foreign direct investment, targeting annual inflows of $5 billion. Meanwhile, CPEC Phase 2.0 focuses on industrial, agricultural, and trade development, with significant emphasis on infrastructure and renewable energy projects, providing a transformative impact on Pakistan’s economic landscape.
FAQs
1. What contributed to the PSX’s 80% growth in 2024?
The PSX’s growth was driven by several factors, including macroeconomic reforms, reduced interest rates, increased trading volumes, and heightened investor confidence. The market also benefited from sector-specific performances, new equity listings, and government debt instruments.
2. How did the KSE-100 index perform throughout 2024?
The KSE-100 index started at lower levels in 2024 and experienced steady growth, particularly from April onwards. The second half of the year saw a sharp rally, with the index reaching a high of 117,039.18 before stabilizing. By December 27, 2024, it closed at 111,351.17 points.
3. What role did macroeconomic reforms play in PSX’s performance?
Macroeconomic reforms, including interest rate cuts and structural adjustments under the IMF’s Extended Fund Facility, significantly boosted the market. These reforms helped anchor inflation to single digits, enhancing investor confidence and market stability.
4. What are the projections for the KSE-100 index in 2025?
The KSE-100 index is forecasted to reach 165,215 points by December 2025, reflecting a potential upside of 55.5%. This projection underscores the growing appeal of the PSX among global investors.
5. What sectors were top performers in PSX in 2024?
In 2024, top-performing sectors included banks, fertilizer, energy, and technology. These sectors benefited from a stable currency, monetary easing, and reform-driven growth. The textile sector is expected to lead the market in the medium term, while technology remains poised for long-term expansion.
Conclusion
The PSX’s robust performance in 2024, marked by an 80% growth in the KSE-100 index, highlights the resilience and potential of Pakistan’s stock market. With increased trading volumes, new listings, and significant macroeconomic reforms, the PSX is poised for continued growth and investor interest in the coming years.
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